2022 was a year of ups and downs in China, so our clients asked for some time to talk, share experiences and prepare for the following year. We were very happy about this wish, as it was just the perfect timing to hold, once again, our annual China Business Club online meeting.
China Business Club was established by PTL Group as a forum for executives operating in the Chinese market. China Business Club meetings provide an opportunity to discuss the small particularities of doing business in China, which significantly affect bottom-line results.
This year’s event concentrated on recent market forces, business operations, and manufacturing in China. The distinguished experts who participated in the discussions included Arie Schreier, PTL Group’s General Manager; Tehila Levi-Lati, Partner at Sullivan & Worcester LLP’s law firm; Tom Nunlist, Senior Analyst with Trivium China; and Carl Breau, Saimen Group’s CEO. We were also accompanied by dozens of executives who run business operations in China, most of them from our clientele.
The event was a great success, and we are happy to share some of the highlights with you.
Doing business in China in 2022 – Voices from the field
Operational processes – China is still open to foreign businesses
Doing business in China always involves challenges, and 2022, in particular, brought up many. Be it business registration processes, opening bank accounts, abuse of power by the legal rep, funds transfer, legislation of various data laws that complicate data management, or safeguarding the company’s Chops – all of these caused hardships for businesses in China.
Meanwhile, China is sending a clear message, that its door is still open to foreign companies. The signal is uniform across the board – from the national government to local governments, banks, and tax bureaus – every institution implements its own policies to attract foreign investment, for instance, offering loans, budgets, lower tax brackets, shrinking the negative list, reducing import duties, etc. Indeed, foreign companies seize the opportunity! This is reflected in the unprecedented number of new clients we helped in China in 2022, many of them from sensitive yet strategic markets such as the US and the UK.
The key to running a smooth, stable, and yielding China operation amid all the above challenges is to build a strong local team, backed & supervised by an external trusted 3rd party. This way, your China teams feel empowered, cared for, and motivated, while at the same time, you get to hold control of the business from afar.
The technological front – A great opportunity for international players
China has abandoned the “growth at all costs” approach. Instead, today China sets goals advocating for quality over quantity. That is to say, China redoubles the emphasis on technological developments, namely growing investments in R&D and experimentations in sectors it sees as strategic, such as semiconductors, AI, autonomous driving, automated public transportation, etc.
Moreover, China is also acting in front of international companies, primarily by incentivizing companies that produce high-end cutting-edge products and easing the Negative List. In 2023, 39 new sectors will open for foreign investment (mainly smart manufacturing, automotive, and green energy).Our services assist international companies in the Chinese market. Contact us
Manufacturing in China – A local sales booster
Manufacturing and production in China are stronger than ever. Transport costs are down 80% on raw materials, and exchange rates are favorable. Two important concepts for foreign companies:
First, as international companies diversify their manufacturing capabilities, and alongside the supply chain disruptions felt in the past years, China has become the most robust center of gravity for production. This is because China offers a complete supply chain: raw materials, workforce, manufacturing, and assembly infrastructures. Production from A-Z grants international companies a significant advantage, which is even more critical in the competitive Chinese market.
Secondly, a fast-growing trend is manufacturing in China for China. Today more than ever, the Chinese sentiment tends towards made-in-China produce, including products made by international companies that localize their designs. When manufacturing in China, your work relations with local customers improve, and the chances of winning in local tenders increase. Hence, many of our clients started investing more in developing their local manufacturing frameworks.
Read more on China production support
2023 is already here, so what now?
Throughout the event, the speakers shared many useful and practical tips for an efficient operation in China in 2023. Here are the top six:
1) Tax offices have different requirements in different areas and some might be more flexible than others to attract companies. Research and compare the tax benefits/refunds your business is eligible for, and make sure you enjoy the ones that serve you best.
2) Don’t put all your eggs in one basket. Practically, register your business in another city and open a few bank accounts to ensure a continuous business operation.
3) Delegate & control. Give your China team more authority and responsibilities, but don’t compromise your control. Appoint a local and objective service provider who can monitor the operation, create a detailed reporting process, and conduct a periodic operational audit in China.
4) Regulations around cross-border data transfer and data management have tightened, and companies face them in almost every aspect of business operations. Have a data audit in place to ensure compliance and avoid potential risks.
5) Manufacturing in China has proven to be highly beneficial for driving sales in China, and the fact is that foreign companies don’t decouple from China at the scale you might think. Therefore, consider building up manufacturing capabilities for more sales and revenues.
6) 2022 was the year of digital marketing in China. Give your China team the tools to build a strong digital presence and promote brand awareness.
To sum up – The Chinese market remains relevant
In January, China lifted all the zero-Covid policy measures, and we witness the gradual re-opening of all financial and bureaucratic systems. National and local governments compete for foreign investment, inviting foreign companies to get back on the bandwagon. We couldn’t ask for a more optimistic way to start 2023.
As always, and especially today, we would be happy to escort you in your China journey. Get in touch for China market entry services, logistics and distribution services in China, and any other need you may have.